Tds under sec 194da

Yes, because tax is deducted only from taxable policies. However, you should also check whether it is exempt or not.

How much income is to be added from the maturity proceeds of the insurance policy? As per 26AS, the amount credited is Rs. 126696 while the TDS is Rs. 2534.00. Is there any exemption if the assessee is a senior citizen?

The amount received is shown under 'income from other sources'. And, there is no exemption for senior citizen. It is taxable as per normal slab rate and you can take TDS credit.

Under which sec. maturity proceeds of insurance policy will be taxed?

It is not specifically mentioned in income definition. However, under exemption provisions, only specified policies are exempt. And, other policies are subject to TDS. If all policies were outside the scope of income tax then there would not be a reason for writing it u/s 10 and taxing others at the source.

So this is inferred that the proceeds from policies (other than exempted policies) are incomes subject to income tax.